We recently compiled a list of the 10 Worst Performing REITs in 2024. In this article, we are going to take a look at where Hudson Pacific Properties, Inc. (NYSE:HPP) stands against the other worst performing REITs in 2024.
The Real Estate Sector Post-Fed Rate Cut
Real estate is one of the sectors that has been looking forward to the Fed rate cuts. While the rate cuts were kicked off with a half-percentage point reduction on September 18, the probability of future rate cuts remains on the horizon. Logan Mohtashami, HousingWire analyst, deems the post-Fed cut housing market confusing for the consumer. In an interview with CNBC, he reiterated that consumers naturally assume mortgage rates dropping with progress on inflation. If mortgage rates drop to 6% and stay there, sales which are trending at the lowest levels in history for the third calendar year could grow. In his opinion, the monetary policy is still restrictive for housing although expanding for the economy. On the optimistic side, he sees price growth cooling and active inventory growing. However, rates need to stay at the 6% level as shooting up from there won’t work for the housing market.
Regarding commercial real estate, the Fed’s shift in policy is “the most notable green shoot” according to Wells Fargo analysts since it lays the groundwork for a commercial real estate recovery although it is not a magic bullet. On September 23, Willy Walker, Walker & Dunlop Chairman and CEO appeared on CNBC to analyze the state of commercial real estate post-Fed rate cuts. According to him, the easing phase has driven volumes in commercial real estate. He expects the sector to be healthy as rates go down further. Regarding the residential real estate in the prevailing US political scenario, he sees a huge policy shift between Biden calling for 5% rent control on a nationwide basis to Kamala Harris calling for 3 million new homes over the next four years. Walker suggested a nice thing in the current circumstances would be a proposal from Trump’s admin, similar or distinct to Harris’, entailing what he is going to do about housing since housing is a major US issue.
Previously, Warren Wachsberger of Eldridge Acre Partners joined CNBC to emphasize that the short-term issues facing US commercial real estate have created an investment opportunity. These issues include higher interest rates, less credit availability, and supply-demand imbalances. Hence, the market stress creates a lot of opportunity to invest in the sector.
Our Methodology:
In order to compile a list of the 10 worst performing REITs in 2024, we used a stock screener to find the stocks that have fallen significantly on a year-to-date basis. The 10 worst performing REITs in 2024 have been ranked in ascending order of their year-to-date declines. We have also included the number of hedge fund holders for each stock, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Hudson Pacific Properties, Inc. (NYSE:HPP)
Year-to-Date Decline: 50.84%
Number of Hedge Fund Holders: 29
Hudson Pacific Properties, Inc. (NYSE:HPP) is a tech and media-focused REIT. The firm focuses on building, owning, and operating premier real estate and related services that are demanded by the dynamic and synergistic tech, media, and other creative industries.
Hudson Pacific Properties, Inc. (NYSE:HPP) serves as the only public owner/operator of premier office and studio properties, with synergistic growth potential. Its portfolio spans global tech and media epicenters with favorable long-term supply-demand fundamentals. HPP’s premier office portfolio and emphasis on tech and media epicenters is an attraction for leading public and established private companies with growth potential in their markets. Simultaneously, the firm’s studio portfolio is first-of-its-kind and caters to content creators’ facilities and services needs.
The firm delivered total revenue of $218.0 million in Q2 2024 compared to $245.2 million in Q2 2023. This was a result of the asset sales and two tenant move-outs at 1455 Market and Sunset Las Palmas Studios which was partially offset by improved studio ancillary revenue. Same-store cash NOI also declined mostly due to the aforementioned moveouts. The firm recorded a net loss attributable to common stockholders of $47.0 million. On the bright side, the REIT signed over 500,000 square feet of office leases in the second quarter.
Hudson Pacific Properties, Inc. (NYSE:HPP) is a differentiated real estate investment trust that operates as a unique provider of end-to-end real estate solutions for dynamic tech and media tenants. The firm currently remains challenged by a slower-than-anticipated studio demand recovery due to which it has suspended the quarterly dividend on its common stock to preserve capital. As of Q2, the stock is held by 29 hedge funds.
Overall HPP ranks 3rd on our list of the worst performing REITs in 2024. While we acknowledge the potential of HPP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HPP, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.